Financial Performance of Microfinance Institutions: A Comparison to Performance of Regional Commercial Banks by Geographic Regions

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Abstract: The number of microfinance institutions (MFIs) making small loans to the developing world's poor has grown to over 7,000. With growth has come increasing competition for scarce funding. Few MFIs have reached self-sufficiency, and fewer still have made the transition to regulated financial institutions. Comparing the performance of MFIs that have attained self-sufficiency with those that have not and comparing both to regional commercial banks in developing countries on selected financial ratios reveals self-sufficient MFIs are strong performers on ROA and ROE. The majority of MFIs, however, are very weak and m need of continued subsidies. Providing financial services to the poor is an expensive proposition and may mean numerous MFIs will not reach self-sufficiency. …

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